Opinion
Docket No. 1193.
1945-07-28
WILLIAM F. FISCHER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
William R. Spofford, Esq., and Chester J. McGuire, Esq., for the petitioner. Paul E. Waring, Esq., for the respondent.
Petitioner in 1902 started a business which he operated as a sole proprietor until January 1, 1939. He had two sons, born in 1905 and 1909, respectively. When each son became 16 he commenced working in the business during vacations without compensation. Upon graduation from college each son then worked full time in the business, with the idea of learning all of its phases. Each was paid a small compensation at first, which in 1934 was increased to include 10 percent of the profits, and in 1935 was again increased to include 33 1/3 per cent of the profits. During the years 1936, 1937, and 1938 the Commissioner disallowed a part of this compensation as a deduction in computing net income from the business. The propriety of that disallowance is not involved in this proceeding. On January 1, 1939, petitioner and his two sons entered into a written partnership agreement, under which petitioner contributed as capital the going business, with a net value of about $260,000, and each son contributed $32,000 in cash, which he had accumulated in prior years, with the agreement that all profits and losses would be shared equally. Held, the partnership thus established was a valid, bona fide partnership, which should be recognized for income tax purposes. William R. Spofford, Esq., and Chester J. McGuire, Esq., for the petitioner. Paul E. Waring, Esq., for the respondent.
This proceeding involves deficiencies in income taxes for the calendar years 1939 and 1940 in the amounts of $73,142.85 and $147,547.25, respectively.
The respondent in determining these deficiencies increased the income reported by petitioner from the business operated as the Fischer Machine Co. from $69,825.62 to $188,676.86 for the year 1939, and from $111,587.72 to $326,697.32 for the year 1940. In a statement attached to the deficiency notice, he explained these adjustments as follows:
In accordance with section 22(a) of the Internal Revenue Code, the alleged partnership is determined to be a device for the allocation of the income of William F. Fischer within the intimate family group, with retention of control by William F. Fischer. The income of Fischer Machine Company as reported in 1939, and as adjusted in 1940, is reallocated as follows:
+-------------------------------------------------------+ ¦ ¦1939 ¦1940 ¦ +-------------------------------+-----------+-----------¦ ¦William F. Fischer, Profit ¦$188.676.86¦$326,697.32¦ +-------------------------------+-----------+-----------¦ ¦William F. Fischer, Jr., Salary¦3,120.00 ¦3,120.00 ¦ +-------------------------------+-----------+-----------¦ ¦Herman W. Fischer, Salary ¦3,120.00 ¦3,120.00 ¦ +-------------------------------+-----------+-----------¦ ¦Total ¦$194,916.86¦$332,937.32¦ +-------------------------------------------------------+
By appropriate assignments of error petitioner contests the above adjustments to his net income for both taxable years.
The respondent also made some minor adjustments which are not contested.
The sole issue, therefore, is whether the business operated as the Fischer Machine Co. was a valid partnership, recognizable for income tax purposes, existing between petitioner and his two adult sons during the taxable years 1939 and 1940.
FINDINGS OF FACT.
Petitioner is an individual, residing in Philadelphia, Pennsylvania. His income tax returns for the calendar years 1939 and 1940 were filed with the collector for the first district of Pennsylvania at Philadelphia.
Petitioner is married and has a wife and three children— a daughter, Melvina Fischer Shirk, born January 30, 1902, and two sons, William F. Fischer, Jr., born September 23, 1905, and Herman W. Fischer, born July 18, 1909. On January 1, 1939, petitioner was approximately sixty-two years of age. Petitioner's two sons will sometimes be referred to herein as William, Jr., and Herman.
From 1902 until January 1, 1939, petitioner was the sole proprietor of a business operating under the name Fischer Machine Co. The nature of this business was the manufacture and sale of specialized machines and related products.
Certificates were filed by petitioner in the office of the Secretary of the Commonwealth of Pennsylvania in 1918 and with the prothonotary of Philadelphia County, Pennsylvania, in 1917, stating that petitioner intended to conduct a business as a sole owner under the assumed name of Fischer Machine Co. (The Pennsylvania Fictitious Names Act was enacted in June 1917.)
On December 31, 1938, petitioner executed a certificate, which was filed with the Secretary of the Commonwealth of Pennsylvania on January 12, 1939, stating that the business theretofore carried on under the assumed name of Fischer Machine Co. was dissolved. A certificate, similar in effect, also executed by petitioner on December 31, 1938, was filed with the prothonotary of Philadelphia County.
On January 1, 1939, petitioner and his two sons executed the following agreement:
AGREEMENT OF PARTNERSHIP
PARTNERSHIP AGREEMENT Made this first day of January , 1939, between WILLIAM F. FISCHER, WILLIAM F. FISCHER, JR., and HERMAN W. FISCHER, upon the following terms and conditions:
1. The undersigned hereby associate themselves as partners under the firm name of ‘FISCHER MACHINE COMPANY.‘
2. The purpose of the partnership shall be the manufacture and sale of machinery and its related products.
3. Profits and losses shall be divided equally among them.
4. That the capital invested in said co-partnership has been invested therein as follows: William F. Fischer, the amounts hereinafter set forth in paragraph 5; William F. Fischer, Jr., $32,000, and Herman W. Fischer $32,000.
5. That the capital invested in said co-partnership by William F. Fischer shall be in accordance with the books of account after giving effect to changes made in Federal Revenue Agent's Report covering the year 1936 and comparable changes for the year 1937, the capital invested by William F. Fischer then being in accordance with the annexed Statement of Assets and Liabilities, marked Exhibit ‘A‘, and made a part of this agreement.
6. The partnership hereby formed shall continue until December 31, 1941, unless terminated prior thereto by mutual consent of all three partners in writing or by the death of any member.
7. The fiscal year of the partnership shall end on December 31st.
8. That William F. Fischer shall receive a salary of Two hundred Dollars per week, and that William F. Fischer, Jr., and Herman W. Fischer shall each receive a salary of Sixty Dollars per week, chargeable as an expense before distribution of net income or loss.
Reasonable withdrawals may be made from time to time subject to the approval of all three partners.
9. Regular double entry books of account shall be kept to record all transactions of the business. The books shall be audited by Certified Public Accountants who shall prepare statements semiannually or more frequently if necessary and prepare all tax returns.
10. No accommodation paper of any sort or kind shall be given by the partnership nor by any member thereof in the partnership or individual name. The partnership or a member thereof shall not become bail, surety, endorser or guarantor for any third person.
11. No notes or other obligations of the partnership shall be given unless signed by all three partners.
12. In the event of death of one partner, his interest in the profits and losses of the partnership shall continue until the last day of the month during which death occurs. At the end of said month the value of his interest in the partnership shall be the balance in his capital account as reflected by the books of the partnership after giving effect to the following:
(a) Proper allowance for Bad Debts and uncollectible accounts.
(b) Accrued Expenses payable.
(c) A Physical Inventory of all merchandise and stock in trade priced at cost or market whichever is lower.
(d) All Machinery, Equipment, Fixtures and Furniture shall be inventoried at book value, less reserves for depreciation or obsolescence provided at book balances adjusted to the last day of the month during which death occurs.
(e) Nothing shall be allowed for goodwill.
13. The value of the deceased partner's interest made in the manner previously described in paragraph 12 shall be paid to his estate as soon as payment can be conveniently made (which may if the surviving partners so desire be not less than one year from the death of such partner) without interest thereon.
14. The right to use the name ‘Fischer Machine Company‘ is the sole and exclusive property of William F. Fischer and no other partner shall have any rights therein upon the termination of this agreement by either expiration of term, mutual consent or the death of any member. William F. Fischer shall have the exclusive right to use the name in connection with any business with which he may in any way become associated.
15. It is hereby agreed that in the absence of written notice being given by either party hereto sixty days prior to the termination of this agreement that the said partnership shall continue under the said terms hereof for a further period of one year, and thereafter from year to year unless either party hereto shall give to the others sixty days written notice of his desire to terminate said agreement prior to the expiration of the then current term.
16. In the event of any disagreement among the said copartners, it is hereby agreed that the subjects of disagreement shall be submitted to the arbitration of three disinterested persons, one to be selected by each of the three parties to this agreement; and in the event of said arbitrators not agreeing, they shall mutually select two additional arbitrators, and the decision of a majority of such arbitrators shall be final and binding upon the parties.
17. No partner shall, without the consent of the others first obtained in writing thereto, sell or assign his share or interest in the partnership to any person or persons whomsoever, or pledge or encumber such share or interest.
18. None of the said partners shall at any time during the continuance of said partnership exercise or follow the business of the firm to his private benefit or advantage, or use its funds or credit therefor, nor shall any of the said partners during the continuance of said partnership, engage in any other business or occupation whatsoever.
The capital agreed upon was fully paid, $32,000 in cash by each of the two sons and assets of the net value of $260,091.07 by petitioner.
On the date the partnership agreement was effected the parties thereto executed certificates which stated that they were carrying on and conducting a general machine business in the Commonwealth of Pennsylvania under the assumed name ‘Fischer Machine Company.‘ One of such certificates was filed in the office of the Secretary of the Commonwealth on January 11, 1939, and the other with the prothonotary of Philadelphia County on January 10, 1939. The certificates are still of record.
The newly formed Fischer Machine Co. maintained bank accounts in four financial institutions in Philadelphia and leased a safe deposit box in one. Cards containing the signatures to be honored in matters pertaining to the affairs thereof and of those entitled to access to the safe deposit box were filed with such institutions, the signatures thereon being those of petitioner, William, Jr., and Herman. Each had absolute and independent authority to represent the company.
William, Jr., was graduated from the Wharton School of Finance and Commerce, University of Pennsylvania, in 1928, where he had specialized in industrial management. Subsequently he completed a one-year night school course in metallurgy at Temple University. He is married and has two sons.
Herman was graduated from the Wharton School of Finance and Commerce in 1930. He completed a one-year night school course in mechanical drawing at Temple University. He is married and has two sons.
From the time his sons were born petitioner planned that they eventually would be associated with him in business. That was the basis of their education. As each son attained the age of sixteen he worked for his father, without compensation, during periods of vacation from school. Upon being graduated from college they were employed by petitioner on a full time basis, with the understanding that they would give their full time; that they would love their work; and that if they did not, then they should make their decision at that time to follow some other vocation.
William, Jr., spent three years in the plant operating all the machines and machine tools and acquainting himself generally with matters of production. Herman spent between three and four years doing the same thing. Subsequent to their experience in the plant the sons were trained in office procedure and business management, preparatory to becoming executives.
By 1933 the sons were well versed in plant management, in production, and in business management. In that year and in the following years each was given and assumed executive responsibilities and by 1938 the sons were capable of running petitioner's business.
Prior to 1933 the salary of William, Jr., was at the rate of $1,300 per year. In 1933 it was increased to $2,340. In 1934 it was $2,340 plus 10 percent of the profits. For the years 1935 to 1938, inclusive, it was $2,340 plus 33 1/3 percent of the profits. For the years 1934 to 1938, inclusive, the amounts paid by petitioner to William, Jr., and the portions thereof allowed by the Commissioner as deductions for compensation paid William, Jr., were as follows:
+---------------------------------+ ¦Year¦Salary¦Bonus ¦Total allowed ¦ +----+------+------+--------------¦ ¦1934¦$2,340¦$9,600¦$11,940 ¦ +----+------+------+--------------¦ ¦1935¦2,340 ¦45,000¦47,340 ¦ +----+------+------+--------------¦ ¦1936¦2,340 ¦40,000¦10,000 ¦ +----+------+------+--------------¦ ¦1937¦2,340 ¦40,000¦22,340 ¦ +----+------+------+--------------¦ ¦1938¦2,340 ¦62,000¦22,340 ¦ +---------------------------------+
Prior to 1934, the salary of Herman was at the rate of $1,300 per year. In 1934, it was $1,300 plus 10 percent of the profits. For the years 1935 to 1938, inclusive, he was paid on the same basis as his brother William, Jr., and for those years the amounts allowed by the Commissioner as deductions for compensation paid Herman were the same as the amounts allowed as deductions for compensation paid William, Jr.
Management of the business of Fischer Machine Co. never has been along departmental lines. Petitioner and his sons operate as a team. Each son has assumed responsibilities along specific lines, but the two work in close harmony with each other and in many respects their duties dovetail. If either has more work than he can handle the other steps in and takes over a portion. William, Jr., primarily attends to the purchase of raw materials, supplies, equipment, and machinery; labor relations, including the hiring and discharging of employees; supervision of cost keeping procedure and technique; and government relations in matters of priority, salary stabilization, renegotiation, preparation of reports filed with governmental agencies, etc. Herman, among other duties, has charge of most of the financial affairs of the business; estimating for bids on prospective contracts; supervision of matters pertaining to production, etc. Each negotiates for sales and signs sales contracts.
Since about 1936 petitioner has gradually relinquished active management of the business, although he has been available in an advisory and consultative capacity. Particularly since the execution of the partnership agreement have the burdens of the business been on the sons, petitioner in the immediately succeeding years having found it necessary to devote the major portion of his time to the affairs of a large corporation in the capital stock of which he and his wife were substantial investors. In 1940 and 1941 he was president of such corporation.
In 1933 and 1934 petitioner consulted his attorney with respect to forming a partnership with his sons. The latter suggested delay of a few years because of the responsibilities involved in a partnership and until the sons had had more experience. Petitioner waited until 1939, at which time he felt the sons had ripened into seasoned businessmen. William, Jr., at that time was 33 years of age and Herman was 29 years of age; both were married, had families, and had accumulated considerable means of their own.
On January 1, 1939, the personal wealth of William, Jr., was $177,000 and that of Herman between $150,000 and $160,000. The cash paid into the business ($32,000 by each) was from their personal funds. Neither son has ever returned to his father directly or indirectly any of the compensation which he received for services rendered prior to the formation of the partnership or any part of his distributive share of the partnership earnings.
On January 1, 1939, new books of account were opened by a certified public accountant who previously had audited the books of the sole proprietorship. Since January 1, 1939, an annual examination of the accounts of the business has been made and the profits thereof, as thus verified, have been credited to petitioner and his two sons in accordance with the partnership agreement.
On the books of account of Fischer Machine Co. there was credited to petitioner's capital account on January 1, 1939, $260,091.07 and to the capital account of each of the two sons $32,000. Each of the three accounts was credited on December 31, 1939, and on December 31, 1940, with amounts computed to be the earnings of the business in such years allocable under the partnership agreement to each, and each account was charged with the respective withdrawals made by the petitioner and his two sons.
For the years 1939 and 1940 partnership returns of income on Form 1065 were filed by the Fischer Machine Co. For the same years petitioner and each of his sons filed an individual income tax return on which each reported as income taxable to him his distributable share of the profits of the Fischer Machine Co. for each year in accordance with the provisions of the partnership agreement.
During the years 1939 and 1940 there were credited on the books of Fischer Machine Co. to the accounts of petitioner, William, Jr., and Herman, the following amounts:
+----------------------------------------------------+ ¦Year¦Name ¦Salary ¦Share of profits¦ +----+----------------------+-------+----------------¦ ¦1939¦William F. Fischer ¦$10,400¦$59,425.62 ¦ +----+----------------------+-------+----------------¦ ¦1939¦William F. Fischer, Jr¦3,120 ¦59,425.62 ¦ +----+----------------------+-------+----------------¦ ¦1939¦Herman W. Fischer ¦3,120 ¦59,425.62 ¦ +----+----------------------+-------+----------------¦ ¦1940¦William F. Fischer ¦10,400 ¦105,432.44 ¦ +----+----------------------+-------+----------------¦ ¦1940¦William F. Fischer, Jr¦3,120 ¦105,432.44 ¦ +----+----------------------+-------+----------------¦ ¦1940¦Herman W. Fischer ¦3,120 ¦105,432.44 ¦ +----------------------------------------------------+
The partnership agreement entered into on January 1, 1939, between petitioner and his two sons, William, Jr., and Herman, created a valid, legal, and bona fide partnership among them.
In 1939 petitioner's distributive share in the profits of Fischer Machine Co., including his salary fixed in the partnership agreement, was $69,825.62; in 1940 (including the fixed salary) it was $115,832.44.
Any part of the stipulation not specifically set forth herein is incorporated herein by reference and made a part of these findings of fact.
OPINION.
BLACK, Judge:
The issue which is involved in the instant case is whether, in each of the taxable years 1939 and 1940, a valid and legal partnership existed between petitioner and his two sons, William, Jr., and Herman, in the ownership and operation of the Fischer Machine Co., a prosperous business engaged in the manufacture and sale of specialized machines and tools. The applicable sections of the statute are sections 181, 182, 183, and 3797 of the Internal Revenue Code, printed in the margin.
Petitioner contends that a legal partnership did exist between himself and his two sons during the taxable years 1939 and 1940, and that, therefore, he may be charged only with his salary of $10,400 and his share of the profits, the total of which for the years 1939 and 1940 are not in dispute and has been stated in our findings of fact. The respondent determined and still contends that the alleged partnership is one in form only; that it should not be recognized for income tax purposes; that the business being conducted should be considered as being petitioner's business; that the sons should be considered as employees of petitioner rather than members of a partnership (just as they were prior to January 1, 1939); and that, therefore, petitioner must be charged with his salary of $10,400 and all of the profits of the business (after deducting an annual salary for each son of $3,120), the total of which for the years 1939 and 1940 amounts to $188,676.86 and $326,697.32, respectively.
SEC. 181. PARTNERSHIP NOT TAXABLE.Individuals carrying on business in partnership shall be liable for income tax only in their individual capacity.SEC. 182. TAX OF PARTNERS.In computing the net income of each partner, he shall include, whether or not distribution is made to him—(c) His distributive share of the ordinary net income or the ordinary net loss of the partnership, computed as provided in 183(b).SEC. 183. COMPUTATION OF PARTNERSHIP INCOME.(a) GENERAL RULE.— The net income of the partnership shall be computed in the same manner and on the same basis as in the case of an individual. * * *SEC. 3797. DEFINITIONS.(2) PARTNERSHIP AND PARTNER.— The term ‘partnership‘ includes a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a trust or estate, or a corporation; and the term ‘partner‘ includes a member in such a syndicate, group, pool, joint venture, or organization.
We do not agree with respondent in the foregoing contentions. We think the evidence shows that the partnership was what it purported to be; that it had substance in that it was bona fide in every respect; and that there is no reason why such a partnership should not be recognized for all relevant purposes, including income tax purposes.
It is true, of course, that since the agreement of January 1, 1939, was a partnership agreement between members of a family, the respondent was entirely justified in carefully scrutinizing the agreement and all of the attendant facts and circumstances. This should be done in all such cases. See Harry C. Fisher, 29 B.T.A. 1041, 1048; affirmed per curiam, 74 Fed.(2d) 1014. But when this is done and all of the facts and circumstances show clearly and convincingly that a valid, bona fide partnership does exist, then full faith and credit should be given thereto. Millard D. Olds, 15 B.T.A. 560; affd., 60 Fed.(2d) 252; Champlin v. Commissioner, 71 Fed.(2d) 23; Montgomery v. Thomas, 146 Fed.(2d) 76; Tower v. Commissioner, 148 Fed. (2d) 388.
The respondent's argument is epitomized in the opening paragraph of his brief wherein he says:
In this proceeding, when the substance of the alleged partnership is considered and mere form is disregarded, it seems obvious that the agreement of January 1, 1939, between the petitioner and his two sons, and their arrangements pertaining thereto did not constitute a bona fide partnership in view of the fact that no business function was served or accomplished by the execution of said agreement. It was merely a device ‘to exalt artifice above reality.‘ Gregory v. Helvering (1935), 293 U.S. 465.
In elaboration of the above the respondent reviews the evidentiary facts, which we have set out in our findings and which need not be repeated here. In this review of the facts the respondent compares the conduct of the business after January 1, 1939, with the conduct of the business prior thereto, with the suggestion after each comparison that there was present no substantial change in the conduct of the business before and after the crucial date. He then deduces from this that the partnership relationship was one of form only, with no substance to give it support.
As we have already indicated, we do not agree with the respondent that there was no substance in the change of conducting the business in question after January 1, 1939. Prior thereto the sons were merely employees of their father. Their services could have been terminated at any time. They had no investment in the business and were not liable for any losses sustained by the business. Thereafter all of this was changed. The sons were equal partners with their father. They had made substantial investments of their own cash funds in the business and had agreed to share the profits and losses equally. The change was not a sham. It was, we think, as real and bona fide as any business transaction could possibly be.
Respondent states that petitioner retained control, but he does not say control of what. Petitioner certainly had no more control of the partnership affairs than any partner would have had. He simply had an equal voice in formulating and conducting partnership policies, which is quite the usual thing for partnerships. Insofar as control of the finances of the partnership was concerned, petitioner had no more than his sons. Each of the partners had authority to sign checks on the partnership accounts, but the signatures of all three were required on promissory notes and similar financial documents. Petitioner had no control over the personal wealth of his sons, nor could he in any way control what they did with their annual allocable share of the earnings of the partnership. In fact, since the formation of the partnership the father has had less control over the business and over the sons than he previously had insofar as their connection with the business is concerned. Prior to the partnership petitioner could operate according to the dictates of his mind, unfettered by any family contractual restrictions, and could discharge his sons if he wished. These powers were relinquished as a result of the partnership agreement. The partnership was not a device for the allocation of petitioner's income within an intimate family group.
If a father can not make his adult sons partners with him in the business where they have grown up in the business and have attained competence and maturity of experience, then the law of partnership is different from what we understand it to be. Of course, it is true, as respondent argues, that petitioner could have continued to operate the business of Fischer Machine Co. as a sole proprietorship, and if he had done that, the entire net income of the business would have been taxable to him. On the other hand, he had the right, by agreement, to take in his two sons as partners and operate the business as a partnership. This latter thing he did, and we can see no reason which would justify us in disregarding it.
The respondent also lays considerable stress on paragraph 18 of the agreement, which prohibits any partner from engaging in any other business, and says that petitioner violated the agreement by devoting the major portion of his time to the affairs of a large corporation in which he and his wife were substantial investors. We do not see wherein this is at all material in determining whether petitioner and his two sons were partners in the Fischer Machine Co. Petitioner had contributed the largest share of the capital and it was the intention of all the parties when the partnership was formed that the sons would contribute the largest share of the services and that all would share equally in the profits and losses. We think this reference by the respondent to petitioner devoting the major portion of his time elsewhere only goes to strengthen petitioner's contention that a bona fide partnership existed in that it shows that the sons were fully capable of assuming the responsibilities of operating the business. Furthermore we think it shows the weakness of the respondent's position, for if the services of each son were worth $22,340 in 1937 and 1938, surely, they were worth more in the taxable years 1939 and 1940, with increased responsibilities, than the $3,120 the respondent has allowed them on the theory that there was no valid partnership and that the business was being run in the taxable years just as it had been in the years prior to the taxable years.
The respondent also makes a point as to the unequal contribution of capital by the partners. He points out that the petitioner contributed about 80 percent, whereas the sons contributed only about 10 percent each. It was the intention, however, that the sons would contribute the largest part of the services and thus gradually relieve petitioner of that burden, which was actually done. Corpus Juris, vol. 47, Sec. 232, p. 790, says:
* * * It is entirely competent for partners to determine by agreement, as between themselves, the basis upon which profits shall be divided, even without regard to the amount of their respective contributions, and such an agreement should be given effect, in the absence of a change; * * *
The Supreme Court of the United States in Paul v. Cullum, 132 U.S. 539, held to the same effect as the above quotation from Corpus Juris. In that case, among other things, the Court said:
While, in the absence of written stipulations or other evidence showing a different intention, partners will be held to share equally both profits and losses, it is entirely competent for them to determine, as between themselves, the basis upon which profits shall be divided and losses borne, without regard to their respective contributions, whether of money, labor, or experience, to the common stock. Story on Partnership, Secs. 23, 24. Such matters are entirely within the discretion of parties about to assume the relation of partners.
In Merten's Law of Federal Income Taxation, vol. 6, Sec. 35.18, dealing with the subject of ‘Computation of Distributive Shares of Partners,‘ the author, among other things, says:
Each partner is thus required to report his ‘proportionate share of the partnership net income.‘ The proportionate share is determined by the partnership agreement, which involves an interpretation of the agreement.
In the instant case petitioner and his two sons have entered into what we think is a legal and valid partnership agreement. In that agreement they have provided what the capital contribution of each should be; they have provided that profits and losses shall be shared equally. All of this was within their power to contract. They have lived up to that contract. We see no reason why we should disregard it.
The respondent in support of his determination cites in his brief, among others, the cases of Gregory v. Helvering, 293 U.S. 465; Schroder v. Commissioner, 134 Fed.(2d) 346; Earp v. Jones, 131 Fed.(2d) 292; Francis E. Tower, 3 T.C. 396; later reversed and cited supra; Harrison v. Schaffer, 312 U.S. 579; Burnet v. Leininger, 285 U.S. 136; Lucas v. Earl, 281 U.S. 111; Helvering v. Clifford, 309 U.S. 331; Johnson v. Commissioner, 86 Fed.(2d) 710; Robert S. Eaton, 37 B.T.A. 283; affd., 100 Fed.(2d) 1013; certiorari denied, 307 U.S. 636; Thomas M. McIntyre, 37 B.T.A. 812; Mead v. Commissioner, 131 Fed.(2d) 323; certiorari denied, 318 U.S. 777; Harry C. Fisher, supra; and Helvering v. Horst, 311 U.S. 112. We do not regard any of these cases as commanding a holding in favor of the respondent on the basis of the facts involved in this proceeding. It would serve no useful purpose to distinguish each individual case. We hold that a valid, bona fide partnership was created on January 1, 1939; that it existed during the taxable years in question; and that it should be recognized and given effect for income tax purposes.
Decision will be entered under Rule 50.